The USA has moved to limit foreign-owned airlines from carrying cargo under federal contracts as the dispute over the control of DHL Airways continues.

Rival air cargo giants Federal Express and UPS have long contended that DHL Airways effectively fails to meet US citizenship tests because of its relationship with DHL Worldwide, which is wholly owned by Germany's Deutsche Post. They have lobbied Congress to block DHL's US Worldwide Express unit from qualifying for military cargoes.

In its $79 billion emergency war-funding act, Congress mandated that a Department of Transportation (DoT) hearing officer or administrative law judge should have the power to decide if federal contracts may be awarded to non-US carriers. The law now bars any non-US flag carriers from such business, limiting any foreign investment to 25%. DHL opponents had proposed barring any federal contracts from going to any air carriers not "effectively controlled" by US citizens. The power given to the hearing officer is a compromise on this outright ban.

Transportation Secretary Norm Mineta had opposed making policy on the contentious issue of foreign ownership through the emergency-spending bill because it would be a major change "with important and potentially broad consequences". Senate Commerce Committee chairman John McCain also opposed using the supplemental spending bill to make "a fundamental policy change".

It is unclear what effect the restrictions, which would last for at least six months, would have on DHL Worldwide's $1.05 billion plan to buy the ground operations of Airborne Express (ABX), the Seattle-based express operator.

Under the purchase, proposed in March, the Airborne ground service unit would be separated from the air cargo operations, but UPS and FedEx argue that DHL Worldwide would still have effective control over the air operations. "Although it states that foreign control will not be an issue with ABX, it is well-founded DoT precedent that the customer-airline relationship can give rise to control of that airline," says UPS.

Source: Airline Business